Measuring Usability
Quantitative Usability, Statistics & Six Sigma by Jeff Sauro

How much is a PhD Worth?

The Price of a PhD in the Usability Profession

Jeff Sauro • November 5, 2009

Does a PhD pay off financially?

I recently helped conduct the statistical analysis of the UPA 2009 salary survey[pdf], and used this opportunity to look into the data to see if I could calculate how much a PhD affects salaries in this profession. 

The dataset contains salary information for a wide range of jobs in the profession—usability engineers, designers, managers and information architects.

The vast majority of the data comes from North America and the UK. According to the salary survey data, around 10% of the usability profession has a PhD. I suspect a much larger percentage probably wonders if a PhD pays off financially.

Regression Analysis

To help answer that question I used a statistical technique called regression analysis. Regression analysis allows you to see which combination of variables best predicts some outcome variable, called the dependent variable. We will use salary, converted into US dollars as the dependent variable. Although there are many variables that can affect salary, there are only a few that have significant predictive power (this is true of regression analysis in general).

There are several variables collected in the salary survey: gender, country, job title, techniques performed on the job, and software tools used to name a few. The variable that has the largest impact on salary is years of experience. That shouldn't be too surprising. We would expect that with more experience you'll have a larger salary.  The next two most important variables that have the greatest impact were being a manager and having a PhD.  Surprisingly, having a Master's degree didn't make a significant contribution over having a Bachelor's degree. Roughly 48% have Masters and 37% have Bachelors as their highest degrees.
Years of experience explains 28% of the variation in salaries. Knowing whether you are a manager or have a PhD add another 4 percentage points.


With regression analysis, each added variable must provide more information than what is contained in the other variables. So being a manager (or not) and having a PhD tells us more than just the total years of experience.  

Just knowing the years of experience explains (accounts for) about 28% of the variation in salaries. Adding the variables of manager and PhD adds another 4 percentage points. That means knowing the years of experience, whether you are a manager and if you have a PhD can explain about 1/3 of the differences in salaries (Adjusted R-squared = 31.6%).  The other 68% is due to other factors such as individual merit, company differences, and geographic differences, as well as many unknown factors.

That may seem like a lot of unknown variation (68%), but in the world of behavioral science 31% of explaining power is a lot. As a point of reference, the SAT (the high-stakes college entrance exam taken in the US) and high-school grades together explain about 36% of first year college performance (in case you wondered).

The combination of variables that best predicts salary (called the regression equation) is:

2009 Salary = $52,484 + $2,941 (Years of Experience) + $16,880(PhD) + $11,108 (Manager)

To use the regression equation we plug in the values for the variables to get a predicted salary. Both PhD and Manager are indicator (or dummy) variables, for which you just insert 1's or 0's to represent their absence or presence.

For example, if you have 5 years of experience, don't have a PhD and are not a manager, your predicted salary is $52,484 + $2,941(5) + $16,880(0) + $11,108 (0) = $67,189. 

Someone with the same experience but with a PhD would have $16,880 more dollars or $84,069.  Someone without a PhD but who is a manager with 10 years of experience would expect to make around $93,002.
A PhD is worth about $17k per year.

We can see a few things from the regression equation.
  1. A year of experience is worth about $3k in the usability profession.
  2. Starting salaries (0 years of experience, no PhD, and not being a manager) are around $52k.
  3. Having a PhD is worth almost $17k more per year than someone with the same amount of experience.
  4. Being a manager nets you about $11k more per year.
For all their predictive power, regression equations have a tendency to be heavily influenced by a few outliers in a dataset. One therefore needs to interpret the coefficients as reasonable approximations as opposed to immutable numbers. For that reason it is helpful to provide 95% confidence intervals around each regression coefficient.  In so doing, we have the following confidence intervals:


95% Confidence Intervals
 Variable  Lower Boundary
 Upper Boundary
 Base Salary
 $50,500  $55,500
 Years of Experience  $2,700  $3,200
 PhD  $11,500  $22,300
 Manager  $7,600  $14,600
Table 1: 2009 Salary regression coefficients 95% Confidence Interval boundaries.

The confidence intervals tell us that if we were to have data on all professionals in the usability profession, we'd expect a PhD to add, on average, between $11.5 and $22.4k to a salary. Keep in mind that this is about the average salary based on these factors. It does not mean that you cannot earn a lot more than this amount because of a PhD, it just means that on average a PhD will contribute around $17k more per year.

2005 Salary Data vs. 2009 Salary Data

The value of a PhD in 2009 is about the same as it was in 2005.
As an additional check on the stability of this estimate of the value of a PhD, I also examined the 2005 Salary survey data. In 2005, certainly a different economic climate than 2009, the estimates are strikingly similar. The 2005 regression equation is:

2005 Salary = $51,798 + $2452 (Years of Experience) + $12,251(PhD) + $12,228 (Manager)

These variables explain almost the same amount of variation as the 2009 data (Adjusted R-squared = 32.4%).  The confidence intervals for the independent variables for 2005 are:


95% Confidence Intervals
 Variable Lower Boundary
 Upper Boundary
 Base Salary
 $48,900 $55,000
 Years of Experience $2,200 $2,800
 PhD $7,000 $17,000
 Manager $8,800 $15,600
Table 2: 2005 Salary regression coefficients 95% Confidence Interval boundaries.


Figure 1 (below) shows the mean and 95% confidence intervals for the 2005 and 2009 data. There was some fluctuation in the data with a bit more money going to PhD's in 2009 than 2005 and a bit less for managers. The large overlap in the confidence intervals suggests that much of the fluctuation is due to the random variability of the sample.So how many dollars is a PhD worth?  Our best guess is about $17k per year. If we need a firm estimate, we can be 95% sure it's worth at least $12k. Over a career $12-17k per year can add up, but is it worth it financially?


Figure 1: Difference in regression coefficient weights for 2005 vs. 2009. The overlap of the 95% confidence intervals show a rather consistent weighting of variables over the four year period.

Delaying entry into the workforce for 5 years would cost $265k--a deficit unlikely to be made up over a lifetime of earnings.

Is a PhD worth it financially?

The education and experience garnered from a PhD is undoubtedly valuable in other ways and you're in an elite group in this profession. But does it pay off financially? We can use the data here to get a rough idea. There is a 5-figure annual premium for PhD's, but there is also an opportunity cost assuming you pursue the degree full time and delay entrance into the usability profession. We'll assume the PhD costs nothing (all expenses paid for by the school), which is of course a big assumption. Let's also assume it takes 5 years to complete a PhD after completing a bachelor's degree.  If you had skipped the extra years at school and took a job right after getting your bachelor's degree, then you would have forgone around $50k per year, plus the $3k annual increase from your experience. After 5 years, the baccalaureate usability professional would have made approximately $292k—which is the opportunity cost.

Upon entering the workforce, with PhD in hand, you immediately get a higher pay of around $68k, but you're well behind the bachelor. Assuming you slog it out in the profession (and we're all still around in 25 years) you'd never quite catch up because the premium of $17k becomes a smaller and smaller proportion of the lifetime earnings. To help make up the difference the PhD perhaps should consider becoming a manager, although even this wouldn't be enough. Another alternative is to consider pursuing a PhD part-time where you don't have to forgo a full-salary (especially if any tuition is offset by an employer).


Figure 2: Lifetime earnings of a PhD vs. not having a PhD (Bachelor, Masters or less).

I haven't met a PhD in the field who regrets their commitment and the long hours in the library with drunken undergraduates.  A PhD opens doors to academic positions (where it is usually required) and may even help you get a job faster. I do know many who have or had considered pursuing a PhD full-time and wondered if they could justify it financially. Individual differences will play a large role in compensation, but the data here suggests that on average a full-time PhD should be pursued for more than just financial reasons.


About Jeff Sauro

Jeff Sauro is the founding principal of Measuring Usability LLC, a company providing statistics and usability consulting to Fortune 1000 companies.
He is the author of over 20 journal articles and 4 books on statistics and the user-experience.
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Posted Comments

There are 54 Comments

March 21, 2014 | MMM wrote:

Thank you. This is very helpful. I am about to start my PhD in Biomedical Informatics. If possible, it would be helpful to see how the college-only versus PhD analysis plays out for different disciplines. For example, I started out as a public health major, and I will get my PhD in essentially an information science field. rnrnI also have a master's degree. I am wondering if education in addition to the PhD also adds value.rnrnThank you. 


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March 14, 2013 | Harrison Picot wrote:

The H-1B visa program in the USA was designed to drive down the wages of those holding advanced degrees and the IT industry has used it to such a great extent that Dr. Norman Matloff (UC Davis) and others have suggested that unless you are getting some other reward (green card, HUD housing and SSI payments for aged parents), you will be ahead by just going to work. When Intel visited and asked for some best and brightest students, and he mentioned a PhD student, they said they didn't want to pay one, they wanted that type of guy with maybe a Masters degree. 


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July 13, 2012 | Piotr wrote:

Are the figures here presented 'after taxation'? 


June 4, 2012 | Adam wrote:

A point of clarification on my previous post for the mathematically astute: I entered the workforce ~20 years ago and later earned my BS in 1995.rnrnSorry for the confusion -  


June 4, 2012 | Adam wrote:

It would be interesting to analyze the change in opportunity cost if the PhD was earned while the person continued to work. I recently began working toward a PhD 20 years after graduating and entering the workforce with a BS in 1995. I later earned an MS in 2004 and an MBA in 2008 - all while working full-time. It has been personally challenging and tough on the family, but it has begun to pay off, both financially and non-financially. I am more competitive for new job opportunities and it is easier to justify a high salary. 


April 19, 2012 | ANN KOBS-ABBOTT wrote:

You answer all of my questions so simply. Statistics was the only C-grade I ever got in bachelors or masters. It was taught by a prof. who was finishing his PhD in stats and was only going to teach us theory, nothing that would be useful. 


February 19, 2012 | Daniel Dickey wrote:

Well there goes my goals.

DanielDickey.com 


February 1, 2012 | Chris Foya wrote:

Taking into consideration of time and money investment to a PhD program, PhD may not be worth all the investment. However, one should only pursue PhD for specific personal goal, for example becoming a university professor or a research director. 


January 23, 2012 | RB wrote:

Good article. I left the Electrical Engineering PhD program for that simple reason. It wouldn't be worth it financially. For those people who do it simply for knowledge, that's fine. I was more interested in getting a pay off at the end. Since it wasn't there, I dropped out of the program. 


January 18, 2012 | Dahashak wrote:

There are many missing variables in the equation. But good article overall.. Do you like to teach? Do you like research? Do you like to learn and read?
Also you totally missed the fact that most companies count a PhD as 3 years experience!!!
 


January 2, 2012 | Jeff Sauro wrote:

Eric,

Good catch, you're right. I've updated the article to show the opportunity cost as $292k, not $265k (which did not add increases per year). 


December 28, 2011 | eric wrote:

"If you had skipped the extra years at school and took a job right after getting your bachelor's degree, then you would have forgone around $50k per year, plus the $3k annual increase from your experience. After 5 years, the baccalaureate usability professional would have made approximately $265k—which is the opportunity cost."

This is incorrect, assumming a batchlors educated professional forgoes the PhD and immediately enters the workforce, then the opportunity cost (assumming it takes an additional 5 years to obtain the PhD) is (5248 + 2941 * 0) + (52484 + 2941 * 1) + (52484 + 2941 * 2) + (52484 + 2941 * 3) + (52484 + 2941 * 4) which is equivalent to $292k (much more than your estimate). 


November 13, 2011 | Ladi Folorunsho wrote:

This article is very helpful, it helps me to make up my mind on the mode of running a PhD program(partime). I think as Curtis says in his comment "giving back to the next generation and solving some of the world problems" are of prime motivation to me.  


September 1, 2011 | Curtis Gerhart wrote:

One should never achieve a higher learning degree purely for financial reasons, there must be more. I am in the process of pursuing a PhD, but not for financial reasons . I am doing it that through my learning I can give back to the next generation. If we can change one life in a positive way our life on this earth will have been well spent. Well written article. Better than many of the "empty" articles one finds on the net. In reading many of the posts I found the majority of comments were about what a PhD could do for the individual and not for the purpose of changing lives. And we all sit and contemplate the problems of the world when it stares us right in the face.  


August 5, 2011 | Jeff Sauro wrote:

Koh,

You're right. Interactions are always important to consider. In this case, no interactions in the model were significant (Phd*Years, Mgr*Years, or Phd*Mgr).  


March 22, 2011 | Koh wrote:

The major problem of this analysis is: the model doesn't have an interaction term between years of experience * phd. As the model only takes into account the main effects of years of experiences and the phd degree, it automatically assumes that those with their phd degree will never catch up (or even fall more behind) so, yes, I appreciate your model, but the model has a huge assumption which could be not true at all.  


March 17, 2011 | MvZ wrote:

Glad Someone at least looked into it properly for once. One thing though... U normally get paid a stipend in most PhD cases... in the UK 13.5k, tax free. Shouldn’t this be accounted into the study? that’s a good 40k straight in the bank over ur time studying... Saying the university covers your fees doesn’t really take this into account.  


January 10, 2011 | Monet wrote:

Well my experience is that it depends. I graduated a 5-year joint Bacheloer and Master program. After that I finished a phd program. I am from a 3rd-world country. During phd I experienced two years of research stays in many places all around the world and everything was funded by scholarships. For me, as a poor guy, this was an unforgettable experience. After that I got to a post-doc in England. The English salary is big for me, if I save and return to my country, then I can buy a 3-room flat there. Not bad. It is a 3-year postdoc, but maybe I could find a job in England after that, I don't know how possible it is now. Anyway I think if you are from a poor country, phd is great. In poor countries phd programs are often funded, your mum is going to be proud of you and there are plenty of scholarships from rich countries to conduct a part of the research there. Choose what you like. 


October 29, 2010 | Jeff Sauro wrote:

Thanks for your comment, good insight. There certainly are some assumptions in this analysis and there would be many mitigating factors on one's career decisions. And as you point out, this is on PhDs in aggregate, so this speaks to average results not individual results. This is especially the case when you consider these variables, while good predictors, still only explain around 30% of the variation in salaries. Individual differences and other unknown factors play a big role. So on average you will get paid more by having the PhD in the usability profession, but on average not a lot more, and in many cases probably not enough to offset the hard and soft costs of obtaining it. It probably helps differentiate you in a tough job market (although I know some recruiters who are concerned about PhD's being overqualified for usability jobs). More importantly it will open many doors, not just financially, that make the experience worth it for almost everyone I've spoken with.  


October 29, 2010 | MIke wrote:

Interesting article - having a PhD myself I was initially smiling at the extra cash and then disheartened to hear that it's not overall 'financially' viable. The last point is key though - it's almost laughable that you'd have to state a PhD should never be pursued merely for financial reasons. I'd be very, very concerned if any prospective student was led to believe otherwise. Doctoral and advanced research should be pursued for a variety of reasons, financial motivations being fairly low down the list. I suppose an economic analysis such as this is bound to take a high-level view and not explain individual differences, but it's worth being aware of those cases to see if that changes our view of the data. For me, my bachelor degree was in English and upon graduation I find it very unlikely that I could have entered the usability profession. A masters degree in IT may have provided the opportunity - given that it included models on HCI, Human Factors, etc. though I can't imagine it would have been easy to find an entry level position (and worth factoring in here the time required to find a job and associated costs there). My PhD was highly relevant to the field however and I'm certain helped me find subsequent employment. So ... the analysis suggests that a usability professional is better off going straight into work than a full-time PhD. However, this is based on the assumption that they could gainfully enter the field following their undergraduate degree and does not consider those who may have found a PhD a necessary step in entering the field.  


October 26, 2010 | shakil wrote:

Good article but not realistic. You made some assumptions.
1.You are assuming that PHD student who is getting in regular job with private or public companies will make as much as they will make after they get the phd. I think that is not realistic. Many people I know they never get to pass the 70k mark in corp world.
2. Not everybody becomes manager in their professional life but any PHD can make way above managers once they graduate with the PHD.
3. There is a opportunity cost for getting the PHD but then there is a opportunity cost for not getting it because you end up working long hours in corporations where as more flexible schedule with more job security.
4.Also remember not everybody becomes CFO or CEO but most PHD can make close to 100k.

I can make the same paper and show you how PHD pays off more than starting job early. I don't have PHD and stuck in Corporate Job.

I guess PHD may not pay off if you start doing your phd in your late 30s or 40s. but in early 30s or late 20s you dont really make the big bucks, so i dont think it makes much difference in the long run. 


September 15, 2010 | Wallace Sadowski wrote:

I would remove the assumption of free tuition (i.e., no cost for graduate school) and factor in that most folks I knew in graduate school worked about 20 hours per week or more in Fellowship programs inside or outside the University. Perhaps that becomes a near \\\"wash\\\" anyway. Still a very interesting read. And, yes I am very glad I finished my Ph.D.! 


September 14, 2010 | anonymous wrote:

GET THE PHD! The biggest problem I see here is that starting salary of 52k a year for a bachelor degree and no experience is most definitely NOT 52k unless one graduates top of ivy.  


September 11, 2010 | Jeff Sauro wrote:

Actually I assumed the PhD would cost you nothing—which for many people is not true. Even with waived tuition and an annual stipend of $15k this will unlikely cover all expenses associated with a full-time PhD (living, books, conference travel etc). At best you\'re out of the workforce for 5-years with no additional debt (for many loans are essential).

The major cost is delaying entry into the workforce, this doesn’t even account for additional benefits such as matching 401k (retirement). Most companies match any contribution to a retirement account. At a starting salary of $52k you can expect to have around 3.5% matched each year. After 5 years compounding at 7% annually that’s around $16k not contributed to retirement. After 35 years of compounding (assuming it is not withdrawn at any point) that $16k will become around $170k at retirement, something in most cases not offset by the higher salary one gets from a PhD in this field. There are many good reasons to pursue a full-time PhD, financial gain in the UX field should probably not be one of them. 


September 11, 2010 | Camden wrote:

You completely disregarded the stipend that full time PhD student receive. Many receive about $15k per year to live on through TA funding, university placed summer employment. 


August 19, 2010 | Enrico Rukzio wrote:

I don't agree with the conclusions in "Is a PhD worth it financially?" as it doesn't consider that e.g. computer science ...PhD students in the UK get usually a stipend of $21k per year (tax free, no council tax, no fees, etc. + additional income from teaching, etc.) and the starting salary of research associates (part time PhD student) is around $40k per year. 


August 17, 2010 | Jeff Sauro wrote:

You’re right, more successful people could tend to get a PhD but even so, the pay isn’t typically high enough to offset the opportunity cost. As another example, do people who go to Stanford, Harvard or Yale make more money than those who go to state schools—typically yes. Is it because of what they learned at those schools or because more successful people tend to go to those schools. It’s more likely the latter. Does the extra income made from an Ivy League education offset the additional cost? That’s a question that has less to do with causation than with description and is what this article has shown with PhDs in usability.

Additional PhD pay on average doesn’t offset the cost of being out of the workforce (regardless of whether it’s the PhD that’s bumping pay or the character of the person). 


August 17, 2010 | faf wrote:

\"if you have a PhD can explain about 1/3 of the differences in salaries (Adjusted R-squared = 31.6%). The other 68% is due to other factors such as individual merit, company differences, and geographic differences, as well as many unknown factors.\"

You assume causality, here, but it is not certain. Perhaps the type of person who goes on to acquire a PhD is more likely to succeed, with our without the terminal credential 


August 8, 2010 | Devanshi wrote:

phd 


July 17, 2010 | Kath Straub wrote:

Interesting to note that, when asked, those (no regrets) docs often don't recommend chasing one for established industry types. I wonder if the ABD rates go up for late starters...? 


June 23, 2010 | anonymous wrote:

The graph is off. Not well prepared. 


May 13, 2010 | Veronica Hinkle wrote:

Excellent Article, Jeff. I really enjoyed the way you explained the regression formula. 


February 24, 2010 | Amit Ranalkar wrote:

Sorry ,i m late on reading this article. But it is amazing & thought provoking. But we request if similar findings are available on industries in India. 


January 18, 2010 | Simon Stevenson wrote:

Liked it for it contained data, together with confidence levels. 


November 11, 2009 | JRB wrote:

This articule supports the advice my undergraduate advisor gave students:

"Don't get a PhD for more money, more prestige, a better position, or to please someone else. Only get a PhD because you *want* to." 


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